Will CIOs Fail on Cloud?

4 Jul

I’ve been reading a lot of content lately that covers three topics:

  1. What’s the future of enterprise architecture;
  2. How we govern businesses who are increasingly bypassing IT and going directly to the cloud; and
  3. Public vs Private clouds and the IT department’s role in creating FUD.

I think that these issues are deeply related and sadly speak of a lack of leadership and business-centricity in many IT departments.  All three areas give CIOs the opportunity to embrace their businesses and move to the heart of strategic thinking but in each case they have not (and are not) grasping these opportunities.  All share two important dimensions – answering fundamental questions about the way in which a business should be shaped and – as an element of that – how IT is supplied.  In both cases many CIOs seem unable to recognise which one is truly important.  Whilst I want to write a longer piece on the implications of these changes for the future of IT, in this post I just wanted to look at the question of whether CIOs will succeed or fail in finding a future within our organisations.

Enterprise Architecture as IT Architecture

Enterprise Architecture was supposed to give us a view of how the business worked.  Executed correctly it was meant to give us the context required to understand the strategic options available to our business and then understand the potential impact of each across various dimensions.  Most EA efforts originated – not unreasonably – within the IT department, however, because as a horizontal function used to thinking systematically they understood the potential first.  Unfortunately many IT departments have failed to address the business context purpose of EA and have become wholly inwardly focused.  Such groups use technology standards and governance as a proxy for really understanding and shaping the business and its supporting systems, leading them to simplified views of their purpose based on technology ‘standardisation’. Many of the technology standards they adopt are often inappropriate for large areas of the business, however, where business capabilities have business models different to those that drove the adoption of the ‘standard’ solution.  The limited scope of their ambition and understanding, however, leads them to push such technologies forward in any case as the ‘strategic solution’ to every problem that looks similar.  In drifting into this role most EA efforts have unfortunately therefore become a problem rather than an enabler; they have become detached from business realities, focused on internal IT issues and taken on the operation of governance processes that mostly result in delays, cost over runs and inappropriate solutions.  Most tragically in doing this they have spurned a tremendous opportunity to investigate and codify the structure and purpose of the enterprise and thereby find a place at the heart of the strategic processes of the business.

As a result of missing this opportunity many CIOs have become confirmed in the role of an operational supplier.  Worse still they are increasingly being seen as a costly and obstructive operational supplier and are therefore constantly under pressure to increase efficiency and reduce cost.  This forces them into a reactive, inward looking position, always looking to cut costs, standardise or begging for investment resources but whose services are still always considered to be decoupled from business value as well as slow, expensive and cumbersome.  Whilst in many ways being in the best position to see opportunities – because of the horizontal role of both themselves and their EA team – they singly fail to take advantage of it because they’re trapped in the wrong conversations by their operational responsibilities.

Enter the Cloud to Cheers from CIOs…. or not.

Despite the failure of IT departments to use the opportunities of EA to help the business gain strategic insights, CIOs have now been offered a golden opportunity to once again take the lead in their organisations.  Cloud computing offers CIOs the opportunity to remove themselves from the operational treadmill and place themselves firmly in the centre of strategic conversations about the future shape of their business.

Cloud is not a technology trend but rather a disruptive change in the way we communicate and consume services.  It will completely reshape organisations and the industries they operate in.  That may sound like hyperbole to some but I genuinely believe it.  History has shown that falling transaction costs make it more cost effective to consume services from partners than to operate them yourself and the pressures of the market will also ensure that these services are much better than those you could build yourself with limited scope.  Furthermore cloud services represent concrete business outcomes that can be aggregated into overall value-webs, moving conversations out of the realm of the bespoke, abstract and technical and into the realm of direct, consumable value outcomes.  Over the coming years every aspect of a business’s operations will be examined, categorised and in many cases outsourced to specialised third parties.  Cloud is the driving force behind these changes by making it inexpensive to connect to other people whilst simultaneously reducing their cost of entry to the market and allowing them to scale at low cost as their business grows.  I repeat – cloud may be viewed as an IT phenomenon currently but the fall out will disrupt every single industry as new specialised companies come rapidly to market with cost and agility profiles that cannot be matched by incumbents.

Many businesses don’t get this yet, however, and while they see the attractiveness of services like Salesforce (indeed are often purchasing them in spite of the CIO) they haven’t yet understood the profound consequences for their organisations in the years ahead.  For CIOs you would think that this is a huge opportunity to take the lead and help their businesses firstly understand and then transform to meet the demands of the new order; essentially someone needs to codify the concrete outcomes required by the organisation (business architecture), source and integrate them together (development and integration) and manage the integrity of the overall value web (business service management).  There is nobody better placed to grasp this opportunity than the CIO, who has an opportunity to lead their companies through a fundamental shift in the purpose and structure of not just IT but also of businesses and their operations.

But. But. But.

The issue is that many CIOs aren’t thinking like this at all.  Many CIOs seem to have come to believe that their job really is operational and therefore see cloud as a threat.  Many CIOs listen to their technologists who fear a loss of control over the way IT is designed and run even though they can’t explicitly relate it to business value.

Enter “private cloud”.  So now the CIO can have their cake and eat it.  They can tell the business that yes cloud is important and – darn it – they’re on top of the whole thing.  But its a big commitment, requires the recruitment of the absolute best technologists in the global industry, will take years to roll out (if it ever gets finished with limited budgets and everything else going on) and will never deliver the instant on, pay as you go model given the retention of a bunch of expensive capital assets and people that can’t be shared.  More importantly it’ll only operate at the – effectively worthless – infrastructure level and won’t provide the business with the opportunity to specialise by consuming world class, multi-tenant services from partners.

It’s Ultimately About Direct Value to the Business, Not Technology

So the business gets fed up with the expense, delay and excuses; they see explicit business value, lower costs, better capability and greater agility on offer externally – and they’re losing ground rapidly against their competitors – and so they go around the CIO and purchase their services directly from cloud suppliers.  Again the CIO has lost the opportunity to lead and has merely been cornered by business and economic reality.  The plain facts are that you can no longer work in isolation from demonstrable business value or put your finger in the cloud dyke to protect your own little private cloud bubble – economically it just won’t work out.  You have to face the fact that you’re not good enough, focused enough or well funded enough to build and operate a large scale cloud platform and that your real value is as a trusted advisor and integrator of services aligned to the business of your organisation.  Worst of all, the CIOs who are currently focused on technology in place of business architecture and sourcing will bring to fruition their own worst fears about losing control and influence – as the business increasingly flows around them they will end up as the dumb guy who missed the – by now obvious – signs about the way in which the cloud was going to affect the business and who showed no leadership.  Most importantly for this discussion the CIO will also be “the guy who runs all that expensive stuff nobody really wants any more with those weird people who talk about the way they used to control things in the old days.  Let’s just keep him out of the way while an external company comes in and helps us to transform our business.” (ironically perhaps the very same consultants and systems integrators who led him down the private cloud route in the first place – and who have been forced to accept their place as advisors and integrators of specialised services from the global market rather than providers and operators of uncompetitive, per-customer technology).

It’s a Combination of Enterprise Architecture and The Cloud That Will Save Those Who Deserve it

Looking at this track record it’s unfortunate that the CIO’s route to salvation requires him to fully embrace enterprise architecture and the cloud.

Essentially every enterprise consists of a number of business capabilities with divergent business models and the first role of the CIO should be to help to visualise these discrete capabilities in order to support higher level thinking about the purpose of the organisation and the best way of delivering each outcome.  Many peripheral business capabilities exist within an organisation merely to support the execution of more business critical core capabilities – such ‘supporting’ capabilities can be outsourced to cloud providers to enable greater specialisation.  It may be that much of the low hanging fruit during the earliest phases of this transformation will be centred around IT applications and services but over time the CIO can facilitate a change in thinking to open the business to the idea of sourcing any kind of business service from external providers in order to integrate successful services and increase the ‘fitness’ of the overall organisation.  Establishing the right to do this first requires the CIO to take a leadership position in early cloud implementations by helping the business deliver in an integrated and compliant way rather than fighting them, losing and further confirming their position outside the strategic tent.  Such an approach can lead to increasing momentum:

  1. On the back of early wins and increased standing CIOs can use the story of the coming disruption to help their businesses understand the exciting wider opportunities and consolidate their strategic leadership role.  Positioning the IT department as the ‘integrator’ and ‘manager’ of a business service portfolio spanning internal and external services provides a sustainable context for the future role of the CIO;
  2. As part of this role the CIO must take on the documentation of the business architecture and use this as a key strategic asset to provide decision support capabilities to the organisation around business models, specialisation and partnerships;
  3. At the same time the CIO should create a process of ‘certification’ based on appropriate criteria to provide an open marketplace of services for capability owners to use.  Informed curation (based on the industry of the company) along with feedback and requests from capability owners for additional applications and services will be a key part of this process and the result should be a portfolio that is open (i.e. not ‘standardised’ and ‘restricted’) but at the same time ‘approved’ to support governance responsibilities;
  4. In going through this transition CIOs have the opportunity to become ever more embedded in the strategic processes of the business – working on business architecture, rapid capability realisation and losing low level operational concerns as they move to cloud providers; and
  5. Most importantly, all of this can be achieved without spending huge amounts of money on non-differentiating technology or becoming more mired in the operational tar pit.  In contrast merely yielding to the changing role of the IT department leads to a virtuous circle of increasing relevance to business value, lower costs, better service and burgeoning innovation.

The reality is that specialised cloud services are increasingly going to be more competitive than those available within an organisation.  Even more critically, accessing such services allows us to specialise within our own organisations, providing us with the focus required to excel in our chosen areas of expertise.  To unlock the benefits of these synergies, however, enterprises need someone who can help them view their organisation more systematically as a portfolio of business capabilities and facilitate access to external services that can be used to enhance or replace them.  My feeling is that this will either be the CIO – or that the CIO will cease to exist.

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